Singapore Aiming For Mauritius-Style Tax Treaty With India

by Mary Swire, Tax-News.com, Hong Kong

21 January 2004

Singapore is seeking to amend its double taxation treaty with India in a bid to emulate the success of the Indo/Mauritius tax treaty.

Speaking to Indian daily the Financial Express recently, Singapore’s Deputy Prime Minister Lee Hsien Loong noted the high volumes of investment channelled into India via Mauritius, thanks to the generous tax breaks offered by the treaty, and expressed hope that similar terms can be worked into the proposed Comprehensive Economic Cooperation Agreement that Singapore is currently negotiating with India.

“Many companies invest in India through Mauritius because of the special arrangement you have...unless we can find some way to approximate that treatment in the Ceca, whatever terms we may negotiate, companies will still prefer the Mauritius route,” the Deputy Prime Minster observed.

Figures released by the Global Business Institute last year revealed that some $6 billion to $8 billion per year, or one third of India’s total foreign investment, is channelled through Mauritius to take advantage of capital gains tax exemptions on investments made in India. At present, there are around 20,000 offshore businesses registered in the Indian Ocean jurisdiction, of which 6,500 invest directly into India.

The 1994 double tax agreement between India and Singapore is under review as part of the Ceca talks, which could result in the treaty being extended to include withholding tax on interest, dividends and royalties. Both governments are aiming to complete the process by April of this year, although impending Indian general elections may force the issue onto the back burner

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